(Bloomberg Opinion) -- Unless you live on Venus, you know someone in California won over $2 billion in the Powerball lottery. And holders of 292.2 million tickets (minus one ticket) were sad for a minute or two. The last time the Powerball was nearly this big was in 2016.
Dear losers: Despite the fact you lost, buying one ticket was a good idea.
Set aside, for now, the tremendous social harm done by lotteries. (They are wasteful, manipulative, and regressive methods for raising government revenue.) From a personal finance perspective, it’s fine to buy a lottery ticket.
True, your chances of winning the lottery are next to nothing. But your chances of winning without a ticket is absolutely nothing. And the leap from absolutely nothing to next to nothing is infinity. A $2.00 ticket gets you a chance at a very high rate of return.
But, since your chances of winning the lottery are extremely small no matter how many tickets you buy, buying additional tickets is not a good investment. An infinitesimal chance multiplied by two or even six is still infinitesimal. You are better off doing something else with that extra $2.
So just buy one lottery ticket. Use the other $2.00 to buy a coffee. Sit down with that coffee and a pen and paper and set a timer for 30 minutes. Start to write down what you would do with your winnings if you hit the jackpot.
By writing down your heart's desire, you will doubtless learn a lot about yourself. But be very specific. Fantasizing you would quit your job if you won, or would stop smoking, or take a trip to the French Riviera is a good start — but you’d have millions left over. So what else would you do? Start a charitable foundation? Volunteer? For which organizations?
Concretely exploring one’s own personal thoughts and feelings promotes well-being. All of this imagining may put you on a path to positive change without winning the lottery after all. Consider it a very cheap form of self-therapy.
You can even make it couples therapy by taking turns telling each other what you would do. My husband and I had that conversation this week. Turns out he had an elaborate foundation developed in his head — some of his millions went to the arts, other millions went to human and worker rights. Who knew?
Such conversations can be painfully illuminating. A long-standing joke tells the story of a husband comes home to his wife and asks, don’t think about it, what would you do if we won the lottery. She says in a heartbeat. I would leave you and live on the beach. Stunned he said, well we won $5.00, here is $2.50.
The traditional finance answer about whether you should buy a lottery ticket is to multiply the probability of winning the prize by the value of the ticket. William Baldwin at Forbes worked that out in this round of Powerball, your chances of winning were 1 in 292 million. That ratio times $1.9 billion is $1.45. You are spending $2.00 for something worth $1.45.
Logic says you walk away.
If the value of the ticket is less than $2, and it is, you don’t buy it. But I say enhanced logic says buy if you learn from your dreams and fantasies about what you would do if you were a billionaire, then go for it. For a true cost of $0.55, it’s a pretty cheap form of entertainment.
Researchers used to say that winning a lottery doesn’t change a person’s baseline happiness; that whatever happiness one got from winning was short lived. But a 2020 study of a group of Swedish lottery winners found that — perhaps not surprisingly — winning large amounts of money did seem to increase their overall life satisfaction. The effect lasted years.
So go ahead, buy one lottery ticket. Just don’t take your winnings to a casino.
Teresa Ghilarducci is the Schwartz Professor of Economics at the New School for Social Research. She's the co-author of 'Rescuing Retirement' and a member of the board of directors of the Economic Policy Institute.